Hanesbrands Will Phase Out PPE Business as Part of Long-Term Growth Strategy
Nearly a year after first making face masks and PPE products for health care workers, Hanesbrands announced that it will exit the PPE business, focusing instead on its Champion brand and expanding its e-commerce offering.
According to MarketWatch, Hanes posted $332.2 million in net losses in the fourth quarter of 2020, and said that it no longer sees PPE as a long-term growth opportunity.
In that fourth quarter, the company's PPE revenue reached $28 million. Total Q4 revenue was $1.8 billion, up 2.8% year over year. For the year, Hanesbrands revenue was down slightly ($6.66 billion in 2020 versus $6.97 billion in 2019), with $959 million coming from PPE.
The PPE market exploded as the COVID-19 pandemic hit the U.S. last March, when businesses first shut down and people started wearing face masks in public for the first time. Recently, the Biden administration has made mask-wearing mandatory in certain settings, and health experts are recommending multiple layers of protection, potentially buoying demand for masks.
When Hanes first entered the market, however, it was more out of immediate necessity. PPE was in critically low supply for health care workers battling the virus. Panicked shoppers hoarded N95 masks and single-use surgical masks, forcing health care workers to ration and reuse supplies.
At the time, Hanes and other apparel suppliers stepped in to ease the burden on the medical industry. Now, the market is shifting. Vaccination rollout continues, and the infection rate peak of January 2021 is starting to decline. Health experts are cautiously optimistic for a “new normal” as vaccination rates increase and hospitalization rates decrease, signaling an end to the frenzied demand for PPE.
The move shows how saturated the PPE market has become and how long-term opportunities diminishing. But it also shows a kind of light at the end of the tunnel for the pandemic if a giant apparel brand is confident enough to move out of PPE.
"It's encouraging to see that COVID vaccines are rolling out around the world," Hanesbrands CEO Stephen Bratspies said on an investor call, according to Motley Fool. "As a result, this rollout along with slowing retail orders and a flood of competitive offerings have dramatically reduced our future sales opportunities. Therefore, we do not view PPE as a future growth opportunity for the company."
Hanesbrands had success in activewear last year, with sales in the category up by 7%. So it makes sense that the company would focus on its Champion line moving forward.
The company plans to provide more details of its “Full Potential” plan during its virtual investor event in May.